1. FEDERAL ANTIMONOPOLY SERVICE. Government regulation on banking market in Russia Competition aspects

2. 2 Areas of legislation  Federal law № 135-FZ of July 26, 2006 «ON PROTECTION OF COMPETITION»  Federal law № 38-FZ of March 13, 2006 «ON ADVERTISING»  CODE OF THE RUSSIAN FEDERATION ON ADMINISTRATIVE VIOLATIONS

3. 3 Dominant position of credit organizations  The Conditions for recognition of a dominant position of credit organizations and the Procedure of establishing the dominant position of credit organizations are determined by the Russian Federation Government and the Bank of Russia  Dominant position of a credit organization can not be recognized as such if its market share is less than: 10% - on the federal market, or 20% - on the regional market  The Procedure of conducting the analysis of the market in order to establish the dominant position of a credit organization are determined by Federal Antimonopoly Service and the Bank of Russia

4. 4 Abuse of dominant position by Sberbank  Credit market in Tver Region Credit contracts stipulated for preliminary consent of Sberbank to obtain credits in other credit organizations Negative effect on general terms and conditions of provision of credit services on the credit market of Tver Region

5. 5 Abuse of dominant position by Sberbank  Banking market for money transfers by individuals via credit organizations without opening an account in Rostov Region commission fee for receiving payments from individuals 2,5% of the amount of payment in Sberbank 1% - 1,5% of the amount of payment in other credit organizations Sberbank’s price is considerably higher than the average price on the market Complainant - «Donenergosbyt»

6. 6 Agreements and concerted practices restricting competition  The tighter control over agreements between financial organizations as compared to agreements between other types of undertakings «Vertical» agreements between financial organizations shall be prohibited irrespective of their market share All agreements of financial organizations must be notified to the antimonopoly authority  Possibility to file a written application to the antimonopoly authority to verify compliance of the draft agreement with the requirements of the antimonopoly legislation

7. 7 Agreements of «Russian Standard Bank»  In Omsk Region «Russian Standard Bank» («Bank Russkiy Standart») entered into exclusive agreements with 86 organizations Entry barriers to the credit market in Omsk Region No cooperation with other banks in the field of consumer credit programs No agreements with other banks in order to offer consumer credit programs No lease of trade premises to other banks offering consumer credit programs The contracting party’s obligations:

8. 8 Unfair competition  Unfair competition means any actions of economic entities (group of persons), which are: aimed at receiving benefits in doing business, contrary to the legislation of the Russian Federation, trade customs, respectability, rationality and justice requirements, capable of inflicting losses on competitors or harming their business reputation  Unfair competition is prohibited

9. 9 Unfair competition by «InvestCapitalCredit»  Credit cooperative «InvestCapitalCredit» InvestCapitalCreditInvestCapitalBank Competitors on the same credit market Misleading as to the provider of credit services «We take deposits» Advertisements

10. 10 Unfair competition by Sberbank  Inscriptions on Sberbank’s ATMs in Astrakhan: Before using credit cards of Russian Standard Bank consult with Sberbank’s specialists has admitted existence of such inscriptions has removed them from all ATMs in Astrakhan has made its apologies to Russian Standard Bank Sberbank

11. 11 Acts, actions and agreements of authorities  Prohibitions concerning anticompetitive acts, actions (inaction) and agreements of government bodies and local authorities apply to public off-budget funds and Bank of Russia  The Law envisages special measures in respect of the Bank of Russia when it violates the antimonopoly legislation by its acts, actions or agreements: Federal Antimonopoly Service Bank of Russia Binding directions Recommendation to stop violations

12. 12 Agreement with Administration of Amur Region  General agreement on cooperation between Administration of Amur Region and «Amurpromstroybank» «Amurpromstroybank» was obliged to give credits to:  Administration and local authorities  suppliers and contractors which fulfill the government contracts  participants to economic programs of Administration Administration was obliged to:  ensure «Amurpromstroybank»’s participation in realization of the Administration’s financial policy  make «Amurpromstroybank» the «authorized bank» in target programs and account management for public enterprises of Amur Region Privileged conditions for «Amurpromstroybank» on the banking market that discriminate the other banks

13. 13 Selection of credit organizations through tenders  Tenders are obligatory not only for government bodies and local authorities but for public off-budget funds and natural monopolies as well Public tenderPublic auction  The Procedure is provided in the Federal law on placement of orders for goods, works and services for public and municipal needs  The list of financial services is exhaustive and includes: placement of deposit, credit granting, bank guarantees, account management and collection of payments

14. 14 Control of economic concentration  No control over each acquisition > 25% stocks / > 50% stocks / > 75% stocks > 1/3 shares / > 1/2 shares / > 2/3 shares  Different criteria for control of concentration on the financial services market authorized capital value of assets  No control over establishment of a credit organization if its authorized capital is paid only by cash means

15. 15 Control of economic concentration  Thresholds for transactions requiring prior consent of the antimonopoly authority (Draft Regulation of the Russian Federation Government) 3 billion rubles 10 billions rubles Acquisition of stocks shares, assets Merger and take-over

16. 16 Advertising of financial services  The Law on advertising envisages more strict requirements for the advertising of financial services Advertising of financial services. Statistics of violations. 277 administrative cases in year 2006 on violations of the Law on advertising 2005 2006 2,2% 6% % of the aggregate violations of the Law on advertising

17. 17 Advertising of retail banking services  Advertisements on banking services should not contain guarantees or promises related to the profit scale, if it can not be proved when entering into a contract should disclose all the conditions, which influence the final profits and expenses of the customer, if any is mentioned  Advertisements on credit services should disclose all the conditions, which influence the final cost of the credit, if any is mentioned

18. 18 Administrative responsibility  Code of the Russian Federation on Administrative Violations envisages penalties for a short list of infringements of antimonopoly legislation:  Non-notification of concentration transactions  Non-notification of financial organizations’ agreements  Non-submission of the required information  Failure to carry out the decision or the binding directive of the antimonopoly authority  Amendments to Code of the Russian Federation on Administrative Violations make the antimonopoly control more effective Came into force on the 13 th of May, 2007

19. 19 Amendments to Code of the Russian Federation on Administrative Violations  Abuse of a dominant position leads to administrative fine of 15.000 – 20.000 rubles 1% – 15% of the proceeds from provision of financial services on the affected market, but not more than 2% of the aggregate proceeds officials credit organizations

20. 20 Amendments to Code of the Russian Federation on administrative violations  Agreements and concerted practices restricting competition lead to administrative fine of 17.000 – 20.000 rubles, or disqualification for a period of up to 3 years administrative fine of 1% – 15% of the proceeds from provision of financial services on the affected market, but not more than 4% of the aggregate proceeds officials credit organizations

21. 21 Amendments to Code of the Russian Federation on administrative violations  Unfair competition leads to administrative fine of 12.000 – 20.000 rubles administrative fine of 1% – 15% of the proceeds from provision of financial services on the effected market, but not more than 100.000 rubles officials 100.000 – 500.000 rubles  Unfair competition combined with illegal use of intellectual property leads to administrative fine of 17.000 – 20.000 rubles, or disqualification for a period of up to 3 years credit organizations officials credit organizations

22. 22 Thank you for your attention!